European Venture Capital: Fewer Deals, Higher Values in 2024
Amsterdam, Monday, 22 July 2024.
Despite a 10% drop in deal volume, European venture capital investments saw a 28% increase in total value during the first half of 2024. The Netherlands stood out with a 20% rise in deals and a 35% increase in value, signaling a shift towards larger, more impactful investments in promising startups.
The Global Context
Globally, the venture capital landscape has seen significant shifts. The total amount of venture capital investments surged from €69.1 billion to €86.6 billion in the last quarter. Europe, in particular, experienced a notable increase from €12.7 billion to €16.3 billion. This data comes from the latest Venture Pulse report by KPMG, which analyzes global venture capital trends on a quarterly basis[1].
Rise in Investment Value
Despite the reduced number of deals, the overall investment value in Europe has been on the rise. This trend is contrary to the global pattern, where the volume of deals has increased alongside their value. It suggests a strategic shift towards fewer but more substantial investments in sectors deemed high-growth, such as artificial intelligence (AI), sustainability, and biotechnology. For instance, in the Netherlands, significant investments were made in companies like Axelera AI (€68 million), BioBTX (€42 million), and Mosa Meat (€40 million)[1].
Sector-Specific Insights
AI continues to dominate the investment landscape, both globally and in Europe. Over half of the top ten financing rounds in the second quarter of the year were in AI, particularly in healthcare, biotechnology, and supply chain innovations. Other sectors attracting considerable investment include energy, cleantech, and fintech. Notable global deals include Core Weave (€7.9 billion), xAI (€5.5 billion), and Lazada (€1.7 billion)[1].
Regional Highlights
In Europe, the UK and Germany led the way with the most significant deals. Companies like Wayve, which focuses on AI technology for autonomous driving, and Abound, a credit provider, raised €917.6 million and €917.3 million, respectively. These figures highlight the concentration of large-scale investments in these regions[1].
Challenges and Future Outlook
Despite the positive trends in investment value, the European venture capital ecosystem faces challenges. Compared to the US and China, Europe lags in creating and scaling innovative startups. Fragmented markets, a risk-averse investment culture, and regulatory hurdles contribute to this lag. Over the past decade, EU venture capital investments averaged only 0.2% of GDP, significantly lower than the 0.7% in the US[2]. The funding gap often forces promising startups to seek capital abroad, leading to a brain drain and loss of economic potential[3].
Potential Solutions
To bridge this gap, various strategies have been suggested, such as completing the Capital Markets Union, regulatory reforms, tax incentives, and bolstering public support. Increasing the availability of equity financing and improving exit options for startups are also crucial. Implementing these reforms is essential for Europe to compete globally and harness the full potential of its innovative startups[3].